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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






2. Ed = (%dQd)/(%dP). Ignore negative sign






3. The most desirable alternative given up as the result of a decision






4. Entry of new firms shifts the cost curves for all firms upward






5. The additional cost incurred from the consumption of the next unit of a good or a service






6. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






7. ATC = TC/Q = AFC + AVC






8. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






9. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






10. Entry (or exit) of firms does not shift the cost curves of firms in the industry






11. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






12. The practice of selling essentially the same good to different groups of consumers at different prices






13. TR = P * Qd






14. The ability to set the price above the perfectly competitive level






15. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






16. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






17. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






18. The imbalance between limited productive resources and unlimited human wants






19. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






20. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






21. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






22. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






23. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






24. The mechanism for combining production resources - with existing technology - into finished goods and services






25. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






26. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






27. Ed > 1 - meaning consumers are price sensitive






28. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






29. The lost net benefit to society caused by a movement away from the competitive market equilibrium






30. The marginal utility from consumption of more and more of that item falls over time






31. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






32. The rational decision maker chooses an action if MB = MC






33. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






34. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






35. Costs that change with the level of output. If output is zero - so are TVCs.






36. Ed = 1






37. Ed = 0 - no response to price change






38. Exists at the point where the quantity supplied equals the quantity demanded






39. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






40. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






41. Exists if a producer can produce more of a good than all other producers






42. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






43. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






44. AVC = TVC/Q






45. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






46. Ed < 1






47. The change in quantity demanded resulting from a change in the price of one good relative to other goods






48. The difference between total revenue and total explicit and implicit costs






49. A good for which higher income increases demand






50. The price of a good measured in units of currency